The Federal Reserve is almost universally expected to raise interest rates at its Wednesday meeting, in only the third rise since the financial crisis.

Policymakers have laid the ground for a rate rise for markets. Janet Yellen, chair of the Federal Open Market Committee, recently said a hike would be "appropriate soon."

The Federal Reserve last raised its federal funds rate at its December meeting from a range of 0.25-0.5 per cent to 0.5-0.75 per cent. The new upper range if it raises further would be 0.75-one per cent.

100 per cent priced in

A survey by CNBC ahead of the meeting showed 100 per cent of respondents believed the Federal Reserve will hike, with 70 per cent saying it will do so again in June.

Meanwhile CME Group calculations based on federal fund futures show markets pricing in a 93 per cent likelihood of a rise.

Economic indicators

Economic indicators have bolstered the case for a further rise. Most recently the non-farm payrolls figures showed the labour market adding more jobs than economists expected, while employment has stayed at low levels the Fed believes tally with full employment.

Eric Lascelles, chief economist at RBC Global Asset Management, said: “A further Fed rate hike at the FOMC meeting is practically pre-ordained. Markets have fully priced the outcome, Fed speakers have shouted it from the rooftops and the job figures confirm the continuation of American economic vibrancy.”

Inflation has also moved towards the Fed’s target rate of two per cent. The personal consumption expenditures index, the Fed’s preferred measure of inflation, came in at 1.9 per cent in January, while consumer prices rose by 2.5 per cent in the same month.

Three hikes in 2017

The FOMC has previously signalled it believed there will be three rate hikes in 2017 through the closely watched “dot plot”, a graph of policymakers’ intentions.

Any upward move in these projections could lead to a further rise in US bond yields, which move inversely to prices. The benchmark US 10-year bond has already hit its highest level since 2014, with a peak at 2.628 per cent, according to Tradeweb.

The strength of consumer indicators adds further weight to the case for a rise.

Mike Bell, global market strategist at JP Morgan Asset Management said: “With consumer confidence buoyant, the ISM survey indicating that risks to the growth outlook are skewed to the upside and a healthy labour market, there are hardly any economic reasons for the Fed not to raise rates.”

Turning hawkish

However, while there is always some risk of disappointment, Bell believes the Fed will turn more hawkish over the course of the year.

“We expect more rate rises by the end of 2018 than the market is currently pricing so believe that bond yields and the dollar can still move higher over the rest of this year, although inevitably not in a straight line.”

Investors will read the Fed’s minutes closely to try to find clues on the pace of tightening of monetary policy over the coming year.